February 16, 2012

 

New Zealand court impedes Chinese acquisition of Crafar farms

 

 

The High Court on Wednesday (Feb 15) requested the New Zealand government to review its decision on Chinese acquisition of Crafar farms, citing overstatement of the economic benefits the deal may bring to New Zealand.

 

Ministers approved last month's NZD210-million (US$176-million) purchase of the 8,000-hectare Crafar farm estate on the North Island, which had been placed into receivership, by Shanghai Pengxin, acting on the recommendations of New Zealand's Overseas Investment Office (OIO).

 

Overseas investors bidding for "sensitive" assets in New Zealand, which include farms, must prove they have relevant business experience and that the deal will "likely bring substantial and identifiable benefit to the country".

 

But a group led by investment banker Sir Michael Fay, which has made its own NZD171.5-million (US$142-million) offer for the farms, as well as Maori trusts, sought a judicial review. They claimed it attributed benefits that any buyer, including their group, would bring to New Zealand, notably NZD14 million (US$11.6 million) to bring the 16 farms - of which 13 are dairy and three livestock - into full production.

 

Justice Forrest Miller said any purchaser of the farming estate, which was in poor condition after being starved of investment, could be reasonably expected to spend money on bringing production up to its full potential.

 

Prime Minister John Key said the government had only signed off on the deal because of the OIO's interpretation. He added that the OIO would now review its decision, taking into account the court's reading of what constitutes a "benefit" for New Zealand.

 

The opposition Labour party claimed most New Zealanders would be pleased with the court's decision.

 

"We should have let New Zealand farmers get in there, they are the best farmers in the world, and do their job," David Shearer, the Labour party leader, told local media.

 

A Pengxin spokesman said he was surprised by the decision but remained committed to the deal, while government ministers expect to receive a fresh opinion from the OIO within days.

 

Many Chinese dairy companies are interested in sourcing milk abroad as they work hard to convince Chinese consumers that their products are now safe, after the tainted milk scandal of 2008 led to hundreds of thousands of Chinese infants falling sick.

 

Bright Dairy & Food, China's third-largest dairy producer, has made no secret that it would like to buy more dairy assets overseas, particularly in New Zealand and Australia. In 2010, it bought a 51% stake in New Zealand milk processor, Synlait.

 

Bright said at the time its goal was to acquire a stable supply of "quality" milk for China but it now appears to have raised its ambitions. Guo Benheng, Bright Dairy's chief executive said the company will now use Synlait as a "production base for high-quality dairy products to supply consumers in New Zealand, China and all over the world".